2017-00206310-CU-FR

Mark D. Chisick vs. Stewart Title of Sacramento

Nature of Proceeding: Motion to Appoint Receiver and for Preliminary Injunction

Filed By: Danielson, Anthony I.

The renewed motion of Plaintiffs Mark D. Chisick (Chisick), as Manager of S360 Properties LLC (S360); Mark D. Chisick and Denise M. Chisick, as Co-Trustees of the Chisick Family Trust; and S360 (collectively “Plaintiffs”) for appointment of a receiver and related injunctive relief is GRANTED.

The defense request for a 60-day continuance to permit discovery is DENIED. Defendants and opposing parties herein Raymond Sahadeo (Sahadeo) and Dhanraj Sahadeo (Dhanraj) (collectively “Defendants”) speculate that discovery in a different case might yield favorable information about the real property transfers that gave rise to this lawsuit. (See Opp. at 11:15-12:11.) Given the speculative nature of the request, and given the waste Defendants appear to have allowed at the properties, good cause for a continuance is lacking. The court notes that Defendants requested a similar continuance when Plaintiffs brought their first motion for a receiver in March 2018. The court also notes that, contrary to Defendants’ suggestion, there is no mandatory 15-day continuance so that Defendants may oppose Plaintiffs’ request for injunctive relief. The mandatory 15-day continuance only applies to preliminary injunctive relief sought after a temporary restraining order has issued. (See CCP § 527(d).)

The parties’ requests for judicial notice of court documents, recorded land documents

and other official records are UNOPPOSED and GRANTED.

Plaintiffs originally moved for a receiver and related injunctive relief on 3/06/18. In a minute order denying the motion, the court described and disposed of the dispute as follows:

This case presents a dispute between business partners who formed an entity to invest in real property. Chisick allegedly managed the entity, S360, with…Sahadeo… . Sahadeo allegedly caused several of S360’s rental properties to be transferred to his father, Dhanraj. Dhanraj allegedly did not pay adequate consideration for the properties. In addition, Sahadeo allegedly failed to obtain Chisick’s approval as required under the operating agreement, and concealed the transfers from Plaintiffs. […] With respect to seven of the rental properties, Plaintiffs have encumbered them by recording lis pendenses. The second amended complaint against Sahadeo, Dhanraj [and others] contains causes of action for, among other things, fraudulent conveyance, fraud, conversion, breach of fiduciary duty, negligence, conspiracy and accounting.

With respect to the seven disputed properties under Dhanraj’s control, Plaintiffs move for the appointment of a receiver to manage, secure and maintain them. Plaintiffs assert that the portion of rents to which they are entitled is continually being converted to Sahadeo’s and Dhanraj’s use. In addition, Plaintiffs assert that Dhanraj is not paying the required taxes or utilities or otherwise maintaining the properties. Plaintiffs thus argue that, absent a receiver, the properties are likely to be wasted and the rents diverted. [Citation.] Further, Plaintiffs assert that Sahadeo and Dhanraj are probably insolvent. Hence, they argue damages after trial do not present a complete remedy.

Much of the evidence Plaintiffs tender to support the motion is on information and belief. A receivership is a drastic and costly remedy. At this point in the case, neither the fraudulence of the transfers nor the waste assertedly committed is sufficiently clear or pronounced to warrant the plenary receivership sought. [Citations.] The court thus denies the motion.

In denying the motion, the court is mindful of the fact that Dhanraj is delinquent on property taxes as of late 2016. [Citation.] Despite the delinquency, Plaintiffs do not argue that a tax sale is likely to occur any time soon. Similarly, there is no evidence any municipality has cited the properties for code violations. Under these circumstances, appointment of a receiver to manage and repair the properties is unwarranted.

(See Order of 3/28/18.)

Dhanraj has now defaulted on the loan used to acquire the properties from S360. (See Moving Memo., ¶ 17 as well as the accompanying footnotes and cited evidence.) Given this change of circumstances, Plaintiffs renew their motion for a receiver and related injunctive relief. They also tender significant evidence that (1) Defendants are judgment-proof, (2) the transfers of title to Dhanraj were not supported by adequate

consideration, and (3) Defendants have not maintained the properties. (See id., ¶¶ 7, 10, 14, 17 and 18, as well as the accompanying footnotes and evidence.) Plaintiffs characterize the situation as one in which Sahadeo and Dhanraj have no desire to maintain the properties and instead are content to extract as much rent as possible before the properties are sold at foreclosure. Plaintiffs argue that they should at least be afforded an opportunity to obtain a receiver who will hold any remaining rents, preserve the properties, pay outstanding sums and widely market the properties before any sale.

Plaintiffs are entitled to a receivership under the circumstances. (See CCP § 564(b)(1) [receiver may be appointed “[i]n an action…between partners or others jointly owning or interested in any property or fund…where it is shown that the property or fund is in danger of being lost, removed, or materially injured”]; id., § 564 (b)(9) [receiver may be appointed “[i]n all other cases where necessary to preserve the property or rights of any party”].)

The only defendants to oppose the motion are Sahadeo and Dhanraj. Their lead argument is that the court lacks jurisdiction to appoint a receiver because the beneficiaries under the deeds of trust on the properties are non-parties that have not received notice of this motion. The argument appears to be that, once beneficiaries under deeds of trust record notices of default and commence the nonjudicial foreclosure process, the beneficiaries must participate in and/or receive notice of any judicial proceeding to appoint a receiver over the properties. Defendants note that the deeds of trust contain assignment-of-rents clauses pursuant to which the beneficiaries could seek their own receivership. Nonetheless, Defendants do not cite any case in which a power of sale or assignment-of-rents clause in a deed of trust was held to circumscribe a court’s jurisdiction to appoint a receiver pursuant to statute. Nor do they cite a legal authority barring a private, well-marketed sale of real property after a beneficiary commences the nonjudicial foreclosure process. The court thus rejects Defendants’ jurisdictional argument.

Next, Defendants argue that the motion should be denied because a receiver will not be able to cure the default and prevent the properties’ sale in foreclosure. Given Defendants’ well-documented failures to pay taxes, utilities and otherwise to preserve the properties, a receiver is more likely than Defendants to preserve the properties to the extent possible, including by maximizing any sale proceeds. And in any event, a receiver should be appointed to hold rents for the balance of the litigation.

Defendants also blame Plaintiffs for recording lis pendenses in this action. Defendants argue that the lis pendenses have thwarted efforts to secure financing to pay off the existing loan and thus avoid foreclosure. Given that Plaintiffs have received a full year’s worth of rents since the lis pendenses were recorded, and given the absence of any evidence that Defendants actually attempted to refinance the properties and were rejected, the argument is unpersuasive.

Finally, Defendants argue that the evidence does not support injunctive relief requested to give effect to the receiver’s appointment. The court disagrees. The evidence submitted with the moving papers demonstrates a significant likelihood that Plaintiffs will prevail on one or more of their claims against Defendants. In terms of interim harm, neither side appears more likely than the other to suffer whether the court does or does not grant the motion. On balance, the equities tip in Plaintiffs’ favor, and they are entitled to the requested injunctive relief.

Disposition

The motion is granted.

The Receiver is directed to file his oath and post a bond in the amount of $30,000.

Counsel shall promptly meet and confer over the differences in the proposed orders submitted. No later than 2/06/19, and after narrowing their differences to the extent possible, each side shall lodge a revised proposed order for the court’s signature.

Should counsel agree completely on a proposed order, then Plaintiffs shall lodge it for the court’s signature.